EU's united front on Russia falling amid gas needs

GEORGE JAHN, Associated PressPublished: July 8, 2014 3:16PM

VIENNA (AP) — A clutch of countries is breaking ranks with the EU's efforts to put economic and diplomatic pressure on Russia over Ukraine and building a pipeline meant to carry huge amounts of Russian gas to their doorstep.

Their defiance of a European Union stop work order is more significant than just another missed chance for Europe to call out the Kremlin. Russian natural gas already accounts for around a third of the EU's needs. The South Stream pipeline could increase Russian supplies to Europe by another 25 percent, potentially boosting Moscow's leverage long after the Ukraine crisis fades.

Adding to the skein of Russian pipelines already ending in Europe, South Stream would go through Bulgaria, Serbia, Hungary, Slovenia, Austria and Italy in one leg and Croatia, Macedonia, Greece and Turkey in a second. The European Commission, the EU executive, has ordered a construction moratorium over concerns with Russia's dual role as pipeline owner and gas supplier. It has also delayed some political talks on the pipeline amid the crisis in Ukraine.

"Developments in Ukraine and Russia have demonstrated that the EU's priority is to diversify its energy sources," says spokeswoman Sabine Berger of the EU Energy Commissioner's office.

But Austria, Hungary, and Serbia — the first two EU members, the third a candidate to join — have said they will build their sections of the project and others may follow, to the displeasure of the EU and United States. In the wake of Austria's decision last month, Washington urged it to "consider carefully" whether that contributed to "discouraging further Russian aggression."

Moscow says such arguments by the U.S. are driven by business concerns. In Vienna recently to lobby for Austrian support for South Stream, Russian President Vladimir Putin said "our American friends ... want to supply Europe with gas themselves."

In Slovenia Tuesday for discussions that included South Stream, Russian Foreign Minister Sergey Lavrov challenged the EU Commission's moratorium as "not in accordance with norms of international law."

Slovene Foreign Minister Karl Erjavec cited North Stream, another Russian pipeline to Europe partially owned and supplied by Russia, as a precedent for South Stream.

European reaction has been generally muted. Many countries in central and eastern Europe already get much of their gas from Russia, making them ill-placed to criticize South Stream. Those further west, like France, have seen their lucrative business relations with Russia untouched by sanctions against Moscow.

And while individual countries are taking steps to diversify their sources, officials seem to recognize there are few near-term options to Russian gas.

Renewable energy projects are not close to meeting demand. Environmental concerns are fomenting widespread opposition to fracking — the disputed extraction of oil and gas from shale formations that has resulted in a U.S. gas boom. And it will be at least a decade before the U.S. can make sea-borne shipments of liquefied natural gas, due to technical and bureaucratic hurdles.

"Europe's energy dependence on Moscow seems to be in the cards for a long time to come," says Michael Klare, author of "Rising Powers, Shrinking Planet, the New Geopolitics of Energy." ''Moscow is not going to give up its dominant position easily."

Such prospects are forcing Western powers to see the threat from Moscow in a new, post-Cold War light. NATO Secretary General Anders Fogh Rasmussen last month accused Russian intelligence agencies of working directly with European environmental groups to fund anti-fracking campaigns.

Russia's annexation of the Crimean Peninsula from Ukraine also has the potential of strengthening its energy dominance in Europe.

Moscow now has control over a large part of the eastern Black Sea, and with it potential natural gas deposits previously claimed by Ukraine that may be worth trillions of dollars. It can also reroute South Stream without having to skirt Ukrainian waters, making the project cheaper and simpler.

Some European criticism of the move to build the pipeline has come from countries that were formerly ruled by the Kremlin. Shortly after Austria agreed to build its section late last month, President Toomas Hendrik Ilves of ex-Soviet republic Estonia chided Austrian President Heinz Fischer, telling him that Moscow can in no way be considered a "strategic partner."

But most reaction is low-key. A statement to The Associated Press from the economics ministry of formerly Communist-ruled Poland said any decision to build the pipeline ultimately lies "in the hands of the interested stakeholders," even if South Stream fails to diversify "routes, sources and suppliers."

Such restraint could be explained by these countries' own deals with Moscow. A direct Russian pipeline to Estonia meets 100 percent of its gas needs. Ditto for Latvia and Lithuania, both former Soviet republics. And Poland covers more than 60 percent of its requirements through Russia, even as it works to diversify its sources.

This allows those needing South Stream to dismiss criticism.

Hungarian Prime Minister Viktor Orban recently challenged "those who say we shouldn't build South Stream .... (to) make an alternative proposal about how we could live without energy." And Bulgarian Energy Minister Dragomir Stoynev said the idea of some countries benefiting from direct Russian gas shipments while expecting his country to wait out the Ukraine crisis is "unacceptable."

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Associated Press writers John-Thor Dahlburg in Brussels, Vanessa Gera and Monika Scislowska in Warsaw and Jovana Gec in Belgrade contributed to this story.